The Effect Of Size-Specific Experience On Entry Mode Choice

Since the beginning of this century, the foreign direct investment of Chinese companies showed strong growth. In 2012, FDI of China hit a record, reaching 84 billion dollar and become the third largest foreign investor, following the United States and Japan. The study on the choice of entry mode for China’s companies has an important practical influence on the development of China’s companies. The purpose of this paper is to explore and make use of experience learning theory to study on the choice of entry mode for China’s companies, and provide a reference for China’s FDI.The Transaction Cost Theory, The Eclectic Theory of International Production, Institution Theory and International Expansion Model have been used to explain the problem of FDI entry mode choice. And very fruitful researches have been made. In the field of Experience Learning, existing literatures make researches on the perspective of entry mode decision type, success and fail of company, culture diversity, host environment et al., ignore the research of size-specific experience.Facing dynamic international market, size-specific experience is an important reference for Chinese company, when they implement foreign investment. Company size refers to the concentration degree and accumulation level of various production factors, which to some extent represents the status and the strength of a company and can reflect competences of acquisition and integration resources. These competences will influence company’s entry mode choice. On the basis of experience learning, this study subdivides size-specific experience into four divisions:same size-specific experience in subsidiary level, the same size-specific experience in parent level, different size-specific experience in subsidiary level and different size-specific experience in parent level, from the dimensions of company level and size similarities and differences. Then construct theory and put forward some hypothesis. Using data of Chinese overseas subsidiaries from 2000 to 2010 as sample, we analysis how the same size-specific experience in subsidiary level, the same size-specific experience in parent level, different size-specific experience in subsidiary level and different size-specific experience in parent level effect entry mode choice and compare the same size-specific experience and different size-specific experience, and how marketization degree of parent company moderate size-specific experience.The results show that the same size-specific experience in subsidiary level, the same size-specific experience in parent level, different size-specific experience in subsidiary level and different size-specific experience in parent level all have a significantly positive impact on entry mode choice of foreign subsidiary, and the effect of the same size-specific experience in both subsidiary level and parent level is stronger than those in both subsidiary level and parent level, and marketization degree of parent company negatively moderates the relationship between size-specific experience and entry mode. On this basis, we further divide different size-specific experience into lower size-specific experience and higher size-specific experience and the results almost keep the same except lower size-specific experience in subsidiary level. Based on above findings, this paper presents implications accordingly.